News
Last week, MISC’s 45%-owned company, Centralised Terminals
Sdn Bhd (CTSB) announced that it had terminated its shareholders agreement
(SHA) with China Aviation Oil (Singapore) Corporation (CAO).
The remaining 55% of CTSB is owned by Dialog Group Bhd (OP,
TP: RM2.79).
CTSB will own a 74% interest in LT3 with the remaining 26%
by CAO. MISC’s effective shareholding in LT3 is thus 33%.
Comments
We are neutral on the termination of the shareholders
agreement as we have not imputed any earnings contributions from the new tank
terminals from LT3. However, MISC’s share price could suffer a near term
negative knee-jerk reaction to the news.
To recap, in late-2011, both CTSB and CAO had entered into a
SHA to undertake the construction, development and operation of a 380,000 m3
oil storage tank terminal called Langsat Terminal 3 (LT3) in Tanjung Langsat,
Johor.
According to Dialog’s management, the termination is mainly
due to the inability of the authority of Tanjung Langsat Port (TLP) to add
berths to the existing facilities for the usage of CTSB.
Although the agreement has been terminated, both parties,
CTSB and CAO have agreed to continue to explore other suitable collaboration
opportunities in the region.
Thus far, CTSB has completed the landfill of the site, and
although the collaboration with CAO may ultimately be shelved, we believe that
the excess capacity will be easily taken up given the strong demand for storage
tank facilities in the region.
Outlook
Additional fleet and capacity are expected from 2H2012
onwards, which should enhance the LNG division earnings.
However, tough time remains, for the Petroleum and Chemical
business due to volatile charter rates, unyielding bunker costs and the
imbalance in the demand and supply of vessels.
Forecast
Maintaining our earnings estimates at this juncture as we
have not imputed for any earnings contributions from the new tank terminal
capacity.
Rating MAINTAIN MARKET PERFORM
Valuation Our SOP-based target price remains
at RM4.66. We have stripped out the value of the assets of Petroleum and
Chemical Shipping as we expect the division to remain loss-making in the near
future.
Risks 1) Lower freight rates, 2) higher bunker
costs and 3) further unexpected provisions from the winding up of the Liner
business.
Source: Kenanga
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